A corporate action where a company creates a new independent company by selling or distributing shares of a subsidiary or division to existing shareholders. The original shareholders receive shares in the new company proportional to their holdings in the parent company.
Compound formed from 'spin' (Old English spinnan, meaning to draw out and twist fibers) and 'off' (Old English of). The metaphor suggests separating something by spinning it away from the main body, first used in corporate contexts in the 1950s.
Unlike a sale where the parent company gets cash, in a spin-off the parent company gets nothing directly - they're literally giving away a piece of themselves to shareholders for free! This often happens when the market isn't properly valuing a division within the larger company structure.
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